The Importance of Stakeholder SatisfactionMon, 10/21/2013 - 10:02
By keeping their operating costs to an absolute minimum mining companies can maximize their profit and improve the return on investment for their shareholders. Jamie Porter, Chief Financial Officer of Alamos Gold, emphasizes the company’s core objective of being a leader in low-cost production, financial performance and ultimately in delivering shareholder value. “Establishing the first element will usually cause success to follow in the others. For this reason, Alamos has focused first and foremost on keeping production costs as low as possible. We are continually exploring opportunities to optimize our operations at Mulatos, whether it be through employee training or employing new equipment or technology,” says Porter. “We have made numerous operational improvements since the start of production in 2005, including increasing crusher throughput while reducing crush size; agglomerating and then conveying ore on the leach pad to eliminate truck compaction; and more recently the addition of a 500 t/d mill to process high grade ore,” he explains.
The mine Porter refers to is the company’s sole property in Mexico; Mulatos is based in the Sierra Madre Occidental, and has been instrumental to the company’s success. Having acquired the project for US$10 million in 2003, it was moved into production in 2005, and since then has generated more than US$260 million in free cash flow. This has all been possible despite initial challenges relating to the remote location of the mine, which Porter says the company was able to overcome through careful planning, engineering, training and supply management. Indeed, these are problems that now seem to be a distant memory, as the company has produced its millionth ounce and generated its billionth dollar of revenue, with additional targets for expansion having been identified in other parts of the concessioned area.
Alamos Gold’s low-cost production success at Mulatos enabled the company to deliver shareholder value. Together with the company’s dividend policy and an active share buyback program, this has made Alamos an attractive financial prospect for current and potential investors. In order to maintain its strong financial standing Porter stresses the importance of taking a responsible approach to growth. “Despite our strong cash position we remain committed to smart, disciplined and manageable growth, aligned with our strategy of adding accretive low cost ounces, in politically safe jurisdictions. We believe we demonstrated this with our recently announced friendly agreements to acquire Esperanza Resources and Orsa Ventures for approximately US$69 million and US$3.5 million, respectively,” he says.
Alamos Gold’s financial success has, for Porter, been in large part attributable to the company’s approach to its people. “People are the most important aspect of any operation, and we believe we have assembled one of the strongest management teams in the industry over the years, with a depth of experience across the board. We have recently bolstered our management team with several key new additions which we plan on leveraging as we embark on our growth plans in Turkey and Mexico,” he says. The company’s emphasis on people has also extended to its interaction with the communities that surround its operations. “From the outset, we have made it a priority to work in concert with the local community to ensure there is an accurate understanding of our operations and that we have a positive impact on the local community and stakeholders,” says Porter. Caring for the environment has its own part to play in this process, and Alamos has invested significantly in minimizing the environmental impact of its Mulatos project. This included the installation of a water treatment plant, which was not a legal requirement according to the environmental standards in place at the time. “We built the water treatment plant believing it to be an environmental best practice. We apply the same philosophy to our social contributions, and have invested heavily in bettering the local community, in the form of direct investment into the community, employment and training opportunities, social programs, and providing free medical care,” says Porter.
Alamos believes in Mexico as an excellent destination for mining, and through these projects is making its own contribution to maintaining good relationships between mining companies, local communities, and government authorities. “As a geopolitically stable mining jurisdiction with a strong government, stable economy, rule of law, and transparent mining code, we believe Mexico is one of the best countries in the world to build and operate a mine,” says Porter. “We have treated all of our key stakeholders in accordance with our key values of honesty, integrity and respect. We have created substantial direct and indirect employment and have paid over US$200 million in local, state and federal taxes since we started operations. In our view, the key to our success has been in establishing and maintaining open lines of communication with all levels of government, and we have been fortunate to have enjoyed strong levels of support from the government of Sonora.”